PAYMENT SYSTEM MANAGEMENT ACT 18 OF 2003

[ASSENTED TO 21 DECEMBER 2003] [DATE OF COMMENCEMENT: 15 MAY 2004]

(Signed by the President)
ACT

To provide for the management, administration, operation, regulation, oversight and

supervision of payment, clearing and settlement systems in Namibia; and to provide
for incidental matters.
ARRANGEMENT OF SECTIONS
1 Definitions
2 Powers and functions of Bank
3 Payment System Management Body
4 Settlement provisions
5 Payment provisions
6 Clearing provisions
7 Payment intermediation
8 Netting agreements and netting rules
9 Utilisation of assets provided as security
10 Information
11 Confidentiality
12 Indemnity
13 Directives by Bank
14 Determinations
15 Settlement of disputes
16 Retention of records
17 Penalties
18 Short title and commencement
1 Definitions

In this Act, unless the context otherwise indicates-

"Bank" means the Bank of Namibia as referred to in section 2 of the Bank of Namibia Act;

"Bank of Namibia Act" means the Bank of Namibia Act, 1997 (Act 15 of 1997);

"banking institution" , as defined in section 1 of the Banking Institutions Act, means a

public company authorised under that Act to conduct banking business, or deemed to be so
authorised;

"Banking Institutions Act" means the Banking Institutions Act, 1998 (Act 2 of 1998);

"Board" means the Board of the Bank referred to in section 4 of the Bank of Namibia Act;

"Body" means the Payment System Management Body established in terms of section 3;

"business day" means any day other than a Saturday, Sunday or public holiday;

"clear" or "clearing" means the exchange of payment instructions between system

participants with a view to reconciling and confirming payment instructions;

"clearing system" means a system whereby system participants can exchange data,
documents and payment instruments and instructions relating to funds or securities transfers
to other system participants;

"Companies Act" means the Companies Act, 1973 (Act 61 of 1973);

 "holding company" means a holding company contemplated in section 1(4) of the
Companies Act;

"Insolvency Act" means the Insolvency Act, 1936 (Act 24 of 1936);

"money" means notes and coins issued in terms of section 20 of the Bank of Namibia Act
and any other currency being legal tender in Namibia;

"national payment system" means the payment system as a whole, and includes any
payment system, settlement system, clearing system and payment system arrangement
used in the process of effecting payment between payers and beneficiaries;

"netting" means the determination of the net payment obligations between two or more
system participants within a payment clearing house or the determination of the net
settlement obligations between two or more system participants within the payment system;

"payment clearing house" means an arrangement between two or more system

participants governing the clearing of payment instructions between those system
participants;

"payment instruction" means an instruction by a payer to transfer funds;

"payment instrument" means an instrument or a process enabling a payer to issue a

payment instruction;

"payment obligation" means an indebtedness that is owed by one system participant to

another system participant as a result of the clearing of one or more payment instructions in
a payment system;

"payment system" means a system that enables payments to be effected between a

payer and a beneficiary;

"payment system arrangement" means procedures and services for the processing of
payment transactions;

"payment system services" means all services relating to payment systems, settlement
system, clearing systems and payment system arrangements;

"service provider" means a person registered as contemplated in section 3(6) (a) as

service provider;

"settlement" means payment or discharge of outstanding obligation that a system

participant owes to another system participant;

"settlement instruction" means an instruction given to the settlement system by or on

behalf of a system participant to effect settlement of a payment obligation or to discharge any
other obligation of one system participant to another system participant;

"settlement obligation" means an indebtedness that is owed by a system participant to

another system participant as a result of a settlement instruction;

"settlement system" means a system established and operated by the Bank to facilitate
 the transfer of funds for the discharge of payment and settlement obligations between
system participants;

"subsidiary" means a subsidiary company as defined in section 1(3) of the Companies

Act, and includes a subsidiary company of a subsidiary;

"system participant" means a person authorised by the Bank under section 2(2) (b) to
participate in the clearing and settlement systems; and

"this Act" includes the determinations made under section 14.

2 Powers and functions of Bank

(1) The Bank may exercise the powers and must perform the functions conferred and
imposed on it by this Act to ensure the safe, secure, efficient and cost-effective operation of
the national payment system.

(2) The functions of the Bank are-

(a) to oversee, inspect and monitor the national payment system, the operation of the Body,
system participants and service providers;
(b) to establish and operate a settlement system, and to authorise persons to participate in the
clearing and settlement systems and to withdraw such authorisation; and
(c) to authorise the operation of the Body by issuing to the Body a certificate of commencement
of business, after having satisfied itself with the Body's constitution, rules, competence and
readiness to manage the payment system.

(3) The Board, in writing, may delegate any power or assign any function conferred or
imposed on the Bank by or under this Act to the Governor, Deputy Governor or any officer of
the Bank, or the Body subject to such conditions as the Board may determine.

(4) The Bank is not divested or relieved of a power or function delegated or assigned
under subsection (3).

(5) The Board may withdraw a power or function delegated or assigned under subsection
(3) at any time.
3 Payment System Management Body

(1) The Bank and banking institutions must cause to be established by a constitution a
juristic person to be known as the Payment System Management Body with the object of
managing the national payment system, and organising, setting technical standards,
regulating the participation of its members in the national payment system and all matters
affecting payment obligations and the clearing and netting of payment obligations.

(2) Subject to subsection (3), membership of the Body is compulsory for the Bank and
every banking institution.

(3) The constitution and rules of the Body which may not be inconsistent with this Act, the
Bank of Namibia Act and the Banking Institutions Act, must be fair, equitable and
transparent, and must, among others-
(a) provide for the terms and conditions for admission as a member of the Body that must be
complied with before admission is granted, and the circumstances under which such
membership may be suspended or terminated;
(b) provide for the terms and conditions for the establishment of any committee or working group
of the Body to deal with various aspects of the national payment system;
(c) provide for the requirements and conditions for the registration of a person who is not a
system participant as service provider to provide one or more payment system services;
(d) enable the Bank, when discharging its responsibilities regarding the monitoring, regulation
and supervision of payment, clearing and settlement systems, to adequately oversee the
affairs and operation of the Body and its members; and
(e) fairly represent and promote the technical and related interests of all banking institutions.

(4) In realizing its objects referred to in subsection (1), the Body must-
(a) determine and administer-
(i) operational and technical policies;
(ii) operational and technical criteria, conditions and standards;
(iii) payment instrument standards;
(iv) electronic notification and message standards; and
(v) formats for electronic files,
pertaining to the national payment system;
(b) act as a forum for the consideration of matters of policy and mutual interest concerning its
members, and deal with and promote any other matter of interest to its members and foster
co-operation between them;
(c) from time to time, certify to the Bank that payment systems, clearing systems and payment
system services, and their providers meet all the standards, criteria and conditions
determined under paragraph (a) ; and
(d) perform such further functions relating to payment, clearing or settlement system as the Bank
may assign to it.

(5) The Body must ensure that the standards, criteria and conditions determined by it
under subsection (4) (a) have the effect of-
(a) encouraging appropriate payment system co-operation and competition in the provision of
payment system services;
(b) ensuring fair access by system participants to payment system services; and
(c) facilitating oversight of the national payment system by the Bank.

(6) The Body-

(a) must register a person who is not a system participant as service provider, and authorise
such person to provide one or more payment system services, if that person meets the
requirements and conditions set out in the Body's rules;
(b) may cancel the registration of a service provider if the service provider contravenes or fails to
comply with any term or condition of its registration.

(7) The Body may not-

(a) commence with its business operation before it is issued with the certificate referred to in
section 2(2) (c) ;
(b) effect any amendment to its constitution or rules before such amendment is approved by the
Bank; and
(c) dissolve without the approval of the Bank.
4 Settlement provisions

(1) A person may not participate in the settlement system unless such person is the Bank
or a system participant.

(2) A system participant must effect the discharge of any payment obligation or settlement
obligation in money or by means of an entry passed through the settlement system to the
credit of the settlement account of the beneficiary system participant which account is
maintained at the Bank for settlement purposes.
 (3) A discharge of payment obligation or settlement obligation that has been effected in
terms of subsection (2) is final and irrevocable.

(4) Despite the provisions of the Insolvency Act, a settlement instruction that has been
finally and irrevocably effected in terms of subsection (2) may not be revoked, reversed,
netted, set-off or set aside.

(5) When a system participant is wound up-

(a) the Registrar of the High Court must lodge with the Bank a copy of the application for
winding-up, if it was made, and the winding-up order within 14 days of issuance of the order;
and
(b) despite sections 341(2) and 348 of the Companies Act, the winding-up order does not affect
any settlement that has become final and irrevocable prior to the lodgement of the copy of
that order with the Bank in terms of paragraph (a) .

(6) The Bank, after consultation with the Body, may determine such conditions, rules or
procedures, as it considers necessary regarding the issuing of settlement instructions and
discharging of settlement obligations.

(7) The conditions, rules or procedures determined in terms of subsection (6) must be
incorporated in settlement contracts to be entered into between the Bank and system
participants.
5 Payment provisions

(1) A person may not issue a payment instrument unless such-

(a) instrument is registered with the Bank upon application made to it by such person in writing;
(b) person is a system participant; or
(c) person is exempted by the Minister under subsection (2), or is one of a category of persons
so exempted.

(2) The Minister, after consultation with the Bank, by notice in the Gazette and subject to
such conditions as the Minister may determine, may exempt any person or category of
persons from the provisions of subsection (1), if the Minister is satisfied that such exemption
is in the public interest and will not cause undue risk to the national payment system.

(3) A person who is not a system participant may not provide any of the payment system
services, unless such person-
(a) is registered as service provider; or
(b) is authorised by the Bank under subsection (4).

(4) The Bank, after consultation with the Body, and upon such conditions as it may
determine, may authorise a person referred to in subsection (3) to provide any of the
payment system services without being registered with the Body as service provider.

(5) A person who contravenes subsection (1) or (3) commits an offence.

6 Clearing provisions

(1) A person may not clear payment instructions unless such person is a system
participant or its agent.

(2) A person who contravenes subsection (1) commits an offence.

7 Payment intermediation
 (1) A person may not accept money or payment instructions, as a regular feature of such
person's business, from any other person for purposes of making payment on behalf of that
other person to a third person to whom that payment is due, unless the person so accepting
money or payment instructions-
(a) is a system participant or its agent;
(b) is the Namibia Post Limited established by section 2(1) (a) of the Posts and
Telecommunications Companies Establishment Act, 1992 (Act 17 of 1992), or the Post Office
Savings Bank referred to in section 1 of that Act, or its agent; or
(c) is a person or one of a category of persons exempted by the Minister under subsection (3).

(2) Subsection (1) may not be construed as prohibiting the acceptance of money or
payment instructions-
(a) by a holding company from its subsidiary, or by a subsidiary from its holding company, or by
a subsidiary from another subsidiary of the same holding company; or
(b) by an agent of the holding company or subsidiary referred to in paragraph (a) .

(3) The Minister, by notice in the Gazette , after consultation with the Bank and the Body,
and subject to such conditions as the Minister may determine, may exempt any person or
category of persons from subsection (1), if the Minister is satisfied that such exemption is in
the public interest and will not cause undue risk to the national payment system.

(4) A person who contravenes subsection (1) commits an offence.

8 Netting agreements and netting rules

Despite anything to the contrary in the Insolvency Act or the Banking Institutions Act, if a
system participant is wound up or placed under judicial management, or a curator is
appointed to a system participant, any provision contained in a written netting agreement to
which the system participant is a party, or any netting rule or practice applicable to the
system participant, is binding upon the liquidator, judicial manager or curator, in respect of-
(a) any payment or settlement instruction which has been delivered to another system
participant, a service provider or to the Bank prior to the winding-up order, judicial
management order or appointment of the curator, and which instruction-
(i) is subject to calculation and determination through clearing or netting; or
(ii) may result in a payment or settlement obligation, which obligation is to be discharged on or
after the date of the winding-up order, judicial management order or appointment of the
curator, or the discharge of which was overdue on the date of the winding-up order, judicial
management order or appointment of the curator, as the case may be; or
(b) any payment or settlement obligation-
(i) which has been determined through netting prior to the issue of the winding-up order or
judicial management order or appointment of the curator; or
(ii) which is to be discharged on or after the date of the winding-up order, judicial management
order or the appointment of the curator, or the discharge of which was overdue on the date of
the winding-up order, judicial management order or appointment of the curator.
9 Utilisation of assets provided as security

Despite anything to the contrary in the Insolvency Act, any asset of a system participant
which the system participant, prior to the issue of its winding-up order, has provided-
(a) to the Bank as security for a loan in respect of its settlement obligation, may be utilised by the
Bank to the extent required for the discharge of that settlement obligation; or
(b) in terms of a written agreement with a service provider, to the service provider as security in
respect of its payment obligation, may be utilised by the service provider to the extent
required for the discharge of that payment obligation.
10 Information

(1) The Bank has access to any information relating to-

(a) a payment system, clearing system and settlement system; and
(b) the Body, a system participant and service provider in respect of any matter regulated by or
under this Act.

(2) Any person in possession of information referred to in subsection (1) must provide
such information to the Bank at any time and in such form as the Bank may require from
such person in writing.
11 Confidentiality

(1) A person may not directly or indirectly disclose to another person any confidential
information that he or she has obtained in the performance of his or her functions for or on
behalf of the Bank, except-
(a) for the purposes of the performance of his or her functions in terms of this Act, the Bank of
Namibia Act or the Banking Institutions Act;
(b) when the disclosure of such information is necessary to protect the integrity, effectiveness
and security of the national payment system; or
(c) when required to do so on authority of the Board or under any law or by a court of law.

(2) A person who contravenes subsection (1) commits an offence.

12 Indemnity

The Governor, Deputy Governor, a member of the Board or an employee of the Bank or
the Body is not personally liable for any loss or damage arising out of any act done or
omitted to be done in good faith under this Act, unless such damage or loss is due to the
Governor's, Deputy Governor's, member's or employee's negligence or failure to comply with
this Act.
13 Directives by Bank

(1) If the Bank knows or reasonably believes that any person participating in the national
payment system engages in or is about to engage in any act, omission or course of conduct,
that results or is likely to result in systemic risk, or is detrimental to or may be detrimental to,
or is or will be contrary to the public interest in, the integrity, effectiveness or security of the
national payment system, the Bank may issue a directive in writing requiring the person,
within the period specified in the directive-
(a) to cease or refrain from engaging in the act, omission or course of conduct, or to perform
such acts specified in the directive as are necessary to remedy the situation;
(b) to provide the Bank with such information and documents relating to the matter as specified
in the directive; and
(c) to conform to the requirements set out in the directive.

(2) Any person who neglects, refuses or fails to comply with a directive issued under
subsection (1) commits an offence.

(3) Irrespective of whether criminal proceedings have been or may be instituted against a
person in respect of an offence referred to in subsection (2), the Bank may apply to the High
Court for an order directing such person to comply with a directive issued under subsection
(1).
14 Determinations
 (1) The Bank, by notice in the Gazette , may make determinations not inconsistent with
this Act relating to-
(a) any matter which is required or permitted by this Act to be determined by the Bank; and
(b) all other matters which the Bank considers necessary or expedient to determine for the
efficient functioning of the national payment system.

(2) A person who contravenes a determination made under subsection (1) commits an
offence.
15 Settlement of disputes

(1) If the Body or system participant considers itself aggrieved by a decision taken by the
Bank under this Act and a dispute arises between them, it must be settled as provided in this
section.

(2) If the Body or system participant desires to settle the dispute, it must furnish the Bank
with full particulars of its grievance in writing, and thereafter the parties must attempt to settle
the dispute by agreement within seven business days of receipt of particulars by the Bank.

(3) If the parties do not succeed in settling the dispute as contemplated in subsection (2),
they may agree to attempt to settle the dispute by mediation within a further period of 10
business days.

(4) "Mediation" as contemplated in subsection (3) means a process whereby-

(a) the parties agree on a mediator;
(b) a mediator familiarises himself or herself with the position held by each party;
(c) a mediator and the parties discuss the dispute at their meeting convened for that purpose;
(d) the parties at or following their meeting with a mediator attempt to settle the dispute by
agreement; and
(e) the parties share the mediator's costs equally.

(5) If the parties are unable to settle a dispute by agreement through mediation in
accordance with subsection (3), the dispute, if it is to continue, must be referred to-
(a) a single arbitrator appointed by both parties; or
(b) an arbitrator or arbitrators appointed, at the request of both parties, by a credible body whose
business is the facilitation and promotion of disputes resolution by means of mediation or
arbitration.

(6) The arbitrator referred to in subsection (5) must as far as possible be a person
appointed on account of his or her knowledge of the law and the national payment system.

(7) The Arbitration Act, 1965 (Act 42 of 1965) applies with the necessary changes to an
arbitration contemplated in this section.

(8) The decision of the arbitrator is final and binding on both parties.
16 Retention of records

Despite anything to the contrary in any law relating to the retention of records, the Bank,
system participants and service providers must retain all records obtained by them during
the course of the operation and administration of the payment, clearing and settlement
systems for a period of five years as from the date of a record.
17 Penalties
 A person convicted of an offence under-
(a) section 5(5), 6(2), 7(4) or 13(2) is liable to a fine not exceeding N$1 000 000 or to
imprisonment for a period not exceeding 10 years, or to both such fine and such
imprisonment; or
(b) section 11(2) or 14(2) is liable to a fine not exceeding N$20 000 or to imprisonment for a
period not exceeding five years, or to both such fine and such imprisonment.
18 Short title and commencement

This Act-
(a) is called the Payment System Management Act, 2003; and
(b) commences on a date to be determined by the Minister by notice in the Gazette .